Fitch Ratings, an international rating agency, has affirmed Armenia’s long-term foreign currency Issuer Default Rating (IDR) at “BB-” with a “stable” outlook. Armenia’s economic growth, strong financial services sector, and construction sector are supporting growth in per capita income. GDP growth in the first quarter of 2025 was 5.2%, and the average growth forecast for 2027 remains at 4.7%.
After a smaller-than-expected deficit in 2024, Armenia has loosened its fiscal policy, taking into account the costs of protecting and rehabilitating those displaced from Nagorno-Karabakh. The budget deficit is expected to widen to 5.4% of GDP in 2025 and average 4.4% in 2026-27. According to the government’s plan, the deficit is expected to be reduced to 1% by 2030; however, Fitch considers this target to be optimistic.
Fitch forecasts that the gross public debt-to-GDP ratio will increase from 48% in 2024 to 51.3% in 2025. By 2027, it may reach 54.2%, coinciding with the average level of countries with a “BB” rating. It also notes the significant share of foreign currency debt in the debt structure – about 50% (as of May 2025). However, refinancing risks are mitigated, considering the high share of multilateral lenders (approximately 80% of external debt).
The sharp increase in re-exports of gold from Russia to the UAE via Armenia in 2024, as a temporary factor, is no longer present. Exports and imports fell by 60% and 50%, respectively, in the first four months of 2025. Fitch forecasts the current account deficit to widen to 4.6% of GDP in 2025, then to decline to 4.4% on average in 2026-27, again above the 2% average for “BB” countries.
Armenia’s international reserves stood at $4 billion as of June 2025, representing a 12% increase from the end of 2024. This corresponds to 3.7 months of external payments coverage. Fitch forecasts reserves to decline to 2.9 months of annual coverage by the end of 2027, below the “BB” average of 4.8 months. The high level of external debt is also noted, with net external debt expected to average 28.4% of GDP over the period 2025-2027.
Inflation in the first half of 2025 was 3.3%, in line with the Central Bank’s target range. Within the framework of monetary policy, interest rates were reduced by 225 basis points to 6.75%. Dollarization remains high, with 47.6% of deposits and 32% of loans denominated in dollars as of May 2025. However, these indicators have decreased significantly compared to 2014, when they were 72% and 66%, respectively.
Armenia has a “5” rating for political stability and human rights, as well as a “5+” rating for the rule of law, quality of governance, and control of corruption.
